Treasury Yields Fall, Dollar Is Stable — Market Talk

1107 GMT - U.S. Treasury yields fall and the dollar is stable as oil prices decline amid expectations that the Democratic sweep in midterm elections could lead to an end of the war with Iran, reducing inflation expectations. Democrats' control of Congress "eased some concerns over potential trade barriers, crude oil prices, and subsequent Fed rate hikes, pushing market participants towards risk assets and Treasury bonds and cutting demand for the greenback," BankPro CEO Paolo Broccardo says in a note. Markets still price a 25-basis-point Federal Reserve hike in December, lending some support to short-term yields, but bets on further tightening through mid-2027 have been pared back, he says. The DXY dollar index is stable at 101.542. The 10-year Treasury yield last trades at 4.877%, down 1.4 basis points, according to Tradeweb. ([email protected])1049 GMT - Market will focus on Bank of England's communication regarding the possible path of future interest rate rises, given markets widely expect a quarter-point rate rise at the 1200 GMT rate decision, Mizuho's Evelyne Gomez-Liechti says in a note. Markets price in a 99% chance of a BOE rate increase at Thursday's meeting and fully price in two more rate hikes by June, LSEG data show. If three or four BOE members vote against a rate increase at Thursday's decision, it could signal a slower pace of future rate increases, Gomez-Liechti says. Nonetheless, if the BOE updates its near-term inflation forecast toward 4.25% to 4.5%, this could indicate rapid rate increases over the coming months, she says. ([email protected])1025 GMT - The Czech koruna could remain under pressure even if the Czech National Bank raises interest rates in a decision at 1330 GMT, Commerzbank's Tatha Ghose says in a note. A quarter-point rate increase is fully priced, he says. More important, therefore, is the total magnitude of tightening the CNB is willing to signal, he says. The koruna will remain weak because inflation is likely to accelerate faster than the CNB will raise rates, leaving the real inflation-adjusted rate low or negative, he says. The euro rises 0.1% to 24.279 koruna. ([email protected])0959 GMT - Long-term allocators to bitcoin, including pension funds, should not alter their approach as Congress switches from Republican to Democrat, Cartwright's investment consulting director Sam Roberts says. "Supportive U.S. legislation helps at the margin, but it should not be the trigger to review strategy," he says. Roberts adds that the congressional switch makes the growing U.S. fiscal deficit even harder to change course, potentially making a case for scarce assets such as gold and bitcoin. Bitcoin is 0.1% higher at $80,253. ([email protected])0958 GMT - The Norwegian krone remains steady against the euro after the Norges Bank kept its policy rate at 4.5% as expected. Norges Bank Governor Ida Wolden Bache said inflation is too high and it will likely be necessary to keep the policy rate elevated for a while. The central bank is prepared to raise rates again if necessary to bring inflation down to target, she said. The Committee hasn't received information indicating that the economic outlook has changed materially since the September meeting, according to the policy statement. The euro traded flat at 10.4446 krone after the decision, little changed from levels beforehand. ([email protected])0943 GMT - The jump in German factory orders in September was encouragingly driven by a solid performance in core items, as opposed to one-off large-scale orders, Ralph Solveen at Commerzbank says in a note. Overall orders rose 4.4% on month, while core orders climbed 5.1%, suggesting underlying demand may be gaining momentum. "After this strong increase in September, a slight upward trend now seems to be emerging in core orders," Solveen says. This was supported by a rebound for the automotive sector following two disappointing months, he notes. "If this [trend] is confirmed in the coming months - as evidenced by the improved sentiment among companies - production is also likely to increase, thus supporting growth in the German economy. ([email protected])0934 GMT - The Bank of England looks set to raise interest rates Thursday as expected, keeping sterling supported after recent gains, ING's Francesco Pesole says in a note. However, the bar for the BOE to surprise markets with strong signals about future tightening seems fairly high as another rate increase is fully priced in February, limiting sterling's potential to rise, he says. Sterling has little near-term potential to reverse lower versus the euro given French debt concerns. However, it faces less supportive short-term rate differentials versus the dollar as U.K. rate expectations are more sensitive to falls in oil prices, he says. The BOE decision is at 1200 GMT. The euro rises 0.1% to 0.8344 pounds. Sterling trades flat at $1.3475. ([email protected])0932 GMT - Investors have slightly lowered their expectations of the Bank of England future interest-rate rises, even though they still price in a quarter-point rate increase during the rate decision at 1200 GMT. Brent crude trades at $95 a barrel, down from over $100 a barrel earlier this week, due to increased prospects of a possible end to the Middle East conflict after Democrats gained control of the U.S. Senate and House of Representative. Investors price in a total of 94 basis points of BOE rate rises by the end of 2027, 11 basis points lower than the 105bps priced in at the start of this week, LSEG data show. ([email protected])0926 GMT - The Democratic landslide in the U.S. midterms will change a lot in American governance, but not China policy--at least not in the short run, says Arthur Kroeber at Gavekal Research. Beijing and Washington's uneasy stalemate should persist, probably until the end of Trump's term. China lies far down Democrats' priority list, behind items such as inflation, AI regulation and the Iran war. "The party has no clear stance on China," divided by differing views of containment versus cooperation. "The Democrats will likely spend the next two years figuring out what China policy they want if they retake the White House, not trying to force big adjustments now." ([email protected])0911 GMT - The decision to keep Malaysia's policy rate unchanged at 2.75% reflects the central bank's confidence in the economy's resilience, AmBank economists say in a note. The central bank believes current monetary settings can support robust growth while keeping inflation manageable, despite geopolitical tensions and elevated global commodity prices, they note. BNM expects economic growth to exceed 5% in 2026, while inflation is forecast to rise in 2027 as global cost pressures persist. However, AmBank says a rate hike would be premature given mounting global risks and manageable inflation, partly due to government subsidies. The central bank is likely to remain data-dependent and wait for greater clarity before tightening, it adds. ([email protected])0909 GMT - The combination of resilient economic growth and a gradual rise in inflation could give Bank Negara Malaysia room to increase its policy rate to 3.0%, OCBC economist Lavanya Venkateswaran says in a note. Those factors would reduce the need to maintain a slightly accommodative monetary-policy stance, she says. Although BNM's concluding remarks were little changed from the previous meeting, she reiterates her expectation of a rate increase to 3.00% at January's meeting. The main risk is that the central bank may take longer to assess the need to normalize rates, she adds. ([email protected])0902 GMT - Bitcoin sentiment has shifted significantly since the U.S. midterms, says Derive.xyz. founder and CEO Nick Forster. "Election night was a textbook case of markets selling the uncertainty and buying the outcome," he says. Derive traders now price in a 55% chance of Bitcoin finishing above $80,000 Friday, versus 5% at its overnight low, and roughly 10% odds of falling below $78,000. The probability of Bitcoin exceeding $100,000 by Christmas rises to 5% from 3.5%, Forster notes. "Traders were paying a premium for protection ahead of the election, but once the results became clear, much of that demand disappeared." The question now is whether it can sustain its recovery once the short covering and hedge unwinding have finished, Forster says. Bitcoin last trades at $80,458. ([email protected])